Stocks may have gotten Tuesday’s trading started on the right foot, but they certainly didn’t end them that way. Although the S&P 500 managed to claw back some of what was at one point an intraday loss of 0.17%, the 0.04% loss the index ended up logging yesterday was still not a gain — and the market needed a decisive gain.
That modest loss could have been much bigger had it not been for General Electric (NYSE:GE), which advanced 1.9% as investors continue celebrating the potential a new CEO poses. On the other hand, the market’s small loss might have been a respectable gain has Advanced Micro Devices (NASDAQ:AMD) not suffered a 7.6% loss as the market continues to figure out just where it stands with rival Intel (NASDAQ:INTC).
That headline-driven action is exactly why none of these story stocks are well-suited for trading right now. The key at this time is getting the right read on stock charts, and it’s the charts of KeyCorp (NYSE:KEY), Copart (NASDAQ:CPRT) and Akamai Technologies (NASDAQ:AKAM) that are most telling as we head into Wednesday’s session.
The past several days haven’t been enjoyable ones for bank stocks, and KeyCorp hasn’t been an exception to that norm. But, the sheer scope of the selling has some traders suggesting the weakness may be about to be replaced by bullishness again.
And, that may well be the way things pan out. If not, though, KEY shares are one bad day away from breaking under a crucially important support level. Worse, KeyCorp is facing the test with an eyebrow-raising backdrop.
Click to Enlarge • The make-or-break line joins most of the major lows going all the way back to April and is plotted with a red, dashed line on both stock charts.
• KeyCorp has used this line as a pushoff point before, but this time is different. This time, it’s in the shadow of a major lower low; the August peak was below March’s high.
• In the weekly timeframe, KEY has not only already broken below another important support line, plotted in blue, but we’ve also already seen a bearish MACD cross. The downward momentum is already formed.
After an amazing 2016/2017 rally, Copart was due for a wave of profit-taking. That’s what happened last month. In response to a disappointing fourth quarter report, CPRT shares were up-ended in a huge way.
It wasn’t the setback in and of itself that’s put the stock in jeopardy right now, however. It’s what’s happened in the meantime, or more specifically, what’s not happened in the meantime, that’s brought Copart shares to the brink of another round of major selling.
Click to Enlarge • The real killer here was Monday’s retest of the moving average line, plotted in white, at $52.97. The bulls were willing to push up and off the developing support level around $50.86 and try to get back above the long-term moving average line, but the buyers couldn’t get over the hump.
• Now CPRT shares have peeled back, and once again are putting pressure on the support line at $50.86. If it snaps, there’s not much left that will be able to stop a second wave of selling.
• Zooming out to the weekly chart not only gives us some more perspective, it gives us a couple more prospective technical floors. The nearest one is the 38.2% Fibonacci retracement line is at $47.77, and the next is the 61.8% retracement at $35.70.
Akamai Technologies (AKAM)
Last but not least, Akamai Technologies shares are no stranger to volatility. In fact, you can pretty much count on wide, wild swings from it. Thanks to Monday’s bearish hint and Tuesday’s confirming clue, though, odds are very good that we’re all the way back into an all-too-familiar selling groove.
Click to Enlarge • The big clue is this week’s move below the 200-day moving average line, which is plotted in white on both stock charts. Crosses of this long-term moving average line tend to last a while, up or down.
• Simultaneously, we’ve seen bearish crossovers — or crossunders, technically speaking — of all the other key moving average lines. This underscores how well developed the new downward momentum has been developed.
• The clincher, so to speak, is the fact that so much bearish volume has taken shape just since early last month. The Chaikin is back under zero on the weekly chart, while the daily chart’s accumulation-distribution line is now sloped downward. There were clearly at least some would-be sellers just waiting in the wings.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.